Insurance Fraud Is an Economic Threat and Collaboration Is the Cure

By Rachel Mwenda

Kenya joined the rest of the world in marking International Fraud Awareness Week, with the burgeoning conversation around integrity and accountability in the insurance sector now more urgent than ever before.

Medical insurance, long viewed as the most compassionate face of financial protection, now finds itself under siege from a silent yet devastating adversary; fraud.

In the medical insurance space, fraud is not just a corporate inconvenience, it is an economic threat that undermines the sustainability of healthcare financing in Kenya.

Industry data by the Insurance Regulatory Authority (IRA) suggests that nearly 40 percent of all insurance claims in Kenya are fictitious.

This staggering figure tells a troubling story, one where unethical practices have inflated costs, slow claims processing, and drive premiums upward, making healthcare more expensive for everyone.

Despite steady growth in insurance classes such as medical insurance, the sector continues to register losses. Two principal drivers stand out, namely the escalating cost of healthcare and the corrosive impact of fraud.

The Association of Kenya Insurers (AKI) estimates that the country loses up to Sh33 billion to insurance fraud in the medical segment alone, pointing to weak systems and collusion. This is about 24 percent of the country’s health budget which is Sh138.1 billion in the current financial year 2025/ 2026.

Fraud schemes take many forms such as, billing for services not rendered, falsified patient details, collusion between providers and patients, issuing unnecessary prescriptions, diagnosis manipulation, membership substitution, fee splitting, provision of generic drugs billed as branded drugs, non-disclosure of pre-existing conditions, diagnosis manipulation and fabricated claims or altered invoices.

These practices collectively distort claims data, undermine insurer profitability, and more broadly, weaken the broader healthcare financing ecosystem.

The economic implications are profound. Fraud reduces insurers’ capacity to pay legitimate claims, discourages investment in innovation, and contributes to price instability in the medical insurance market. Ultimately, it affects everyone, from policy holders and healthcare providers to regulators and the economy at large.

Encouragingly, Kenya is beginning to confront this challenge head-on. In August, the Ministry of Health announced a Joint Anti-Fraud Action with medical insurers aimed at eliminating ghost patients, penalizing malpractice, and rebuilding public confidence. The measures include biometric verification of patients, joint audits, and a shared database of fraudulent providers; this model represents real progress in aligning public and private efforts against fraud.

The move mirrors successful international examples. In the United Kingdom, coordinated data sharing and advanced fraud detection systems have sharply reduced losses.

In the United States, legislative reforms are complemented by public education campaigns that empower citizens to identify and report fraud. These experiences underscore a simple truth, that combating fraud requires both technology and collaboration.

At Minet Kenya, fraud prevention is seen not merely as a compliance requirement, but as a foundation of ethical and sustainable business.

The company continues to enhance internal controls, conduct rigorous third-party due diligence, institutionalize a robust whistle-blowing policy, conduct continuous fraud risk perception and deploy capacity-building programs to foster a culture of transparency.

We hope to scale these efforts by deploying data analytics and artificial intelligence to detect anomalies before they become losses.

However, the industry must go further. Fraud thrives in silence, collaboration exposes it. It is now burgeoning that the country needs an integrated national approach to fraud risk management, one that combines policy enforcement, technological innovation, and public awareness.

Regular forensic reviews, rigorous provider screening, and sector-wide awareness campaigns will be crucial to building resilience. It is important for all stakeholders to appreciate that fraud is not a victimless act, rather an invisible tax on every honest policyholder and a drag on Kenya’s economic competitiveness.

Insurers, healthcare providers, regulators, and consumers should stand together to create a transparent and sustainable insurance ecosystem, one that rewards integrity and deters misconduct.

In conclusion, corporate culture is often inseparable from the broader societal culture. A corporate environment that embraces zero tolerance for fraud is more likely to thrive in a society where a similar ethos prevails. By combining strict enforcement, technology and public awareness, Kenya can build a sustainable insurance sector that rewards honesty and protects all stakeholders.

The writer is the General Manager, Head of Legal & Compliance at Minet Kenya